Does my $2 brokerage income need to be reported if the tax form is watermarked?

Yes, technically all income needs to be reported on your tax return regardless of the amount. The watermark on the form doesn't change its legitimacy - brokerages often mark copies this way. That said, the IRS has a practical approach to de minimis amounts. While the law doesn't specify a minimum reporting threshold for interest or dividend income, the reality is that $2.47 is unlikely to affect your tax liability in any meaningful way. The brokerage is required to report to the IRS when the amount exceeds $10, so amounts below that threshold generally don't trigger automatic matching in IRS systems. If you're using tax software, it's usually easiest to just enter it and be done with it. The software will handle the calculations properly, and you'll have peace of mind knowing you reported everything.

After dealing with similar tiny brokerage amounts, I found taxr.ai (https://taxr.ai) super helpful for figuring out what to do with these small investment incomes. When I wasn't sure if I needed to report a $3 dividend payment, I uploaded my watermarked brokerage statement and it instantly clarified that while all income is technically reportable, amounts under $10 are rarely an issue. The analysis also explained why my form had that watermark - turns out it was just marking it as a taxpayer copy!

I was super skeptical about using taxr.ai like I mentioned before, but since my taxes were getting complicated with multiple small dividend amounts, I decided to give it a try. I'm actually really impressed! I uploaded statements from three different brokerages (including some with those annoying watermarks), and it immediately broke down which numbers needed to go where on my Schedule B. It saved me at least an hour of staring at forms and Googling tax rules. This might sound dramatic but it was such a relief having something clearly explain all those tiny dividend amounts and interest payments.

If you're struggling to get answers about these brokerage forms from the IRS, I highly recommend Claimyr (https://claimyr.com). I spent HOURS on hold trying to ask about reporting requirements for small amounts on watermarked forms, then found this service. They got me connected to an actual IRS agent in about 15 minutes who confirmed that while technically all income is reportable, they don't flag returns for tiny amounts like $2-3 in dividends. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c

I need to eat crow about what I said about Claimyr. After dismissing it as BS, my curiosity got the better of me and I tried it when I couldn't get an answer about some weird brokerage forms with watermarks. Not only did it work, but I was connected to an IRS rep in 20 minutes after spending literally 3 days trying on my own. The agent confirmed that tiny amounts like OP's $2 don't need to be reported if the brokerage didn't issue an official 1099 (watermarked versions are sometimes just courtesy copies when below reporting thresholds). I'm honestly shocked this service exists and actually delivers.

Guys I work at a tax prep office and we see this ALL THE TIME. These tiny brokerage amounts are annoying but here's the real deal: if it's under $10, the brokerage isn't required to report it to the IRS. That's why the form is watermarked - it's essentially saying "this isn't an official filing copy." Technically? Yes all income is taxable. Practically? The IRS doesn't have the bandwidth to care about your $2.47. We tell clients not to bother amending for these small amounts. If you haven't filed yet, toss it in for completeness. If you already filed, forget about it and move on with your life.

Has anyone noticed that different brokerages have different standards for what they send tax forms for? My Fidelity account sent me a 1099 for $3.12 in dividends (with that annoying watermark), but my Schwab account didn't send anything for $4.25. I'm so confused about what actually needs to be reported!!

I've been dealing with this exact same situation! Had a watermarked 1099-DIV for $1.83 from my Robinhood account and was totally confused about whether it was "real" or not. What I learned is that the watermark usually means it's a courtesy copy - the brokerage is giving you the info but didn't actually file it with the IRS because it's under their $10 reporting threshold. The form itself is legitimate, it's just that they're not required to send it to the government. I ended up including it on my return anyway since I was using TurboTax and it literally took 30 seconds to enter. My thinking was better safe than sorry, especially since such a small amount wouldn't affect my tax liability anyway. If you're doing paper filing though, honestly I'd probably skip it - the hassle isn't worth it for under $3. The key thing is that watermark is actually helpful info - it's telling you this is below the official reporting threshold, so you're probably in the clear either way you decide to handle it.